Third Circuit Invalidates Arbitration Clause In Employment Contract

By Bonny Rafel

It is common for employers to include mandatory arbitration clauses in employment contracts offered to new employees. Sitting in the room with your new boss, it is difficult to resist signing the contract as presented. How can one reasonably “make waves” even before being hired? Of course employees feel they have no choice but to sign the contract as a take it or leave it.

The requirements included: (1) filing a “detailed written grievance” with the employee’s manager within five days of receiving notice of a disputed action; (2) refiling that grievance with a managing director within two days of receiving a response from the manager; and (3) filing a written request for arbitration within five days of receiving the managing directors decision.

The court ultimately decided that the contract presented to the employee was incredibly one sided. Since the employee was given no room for negotiation by the company, the court ruled that “the contract was procedurally unconscionable.”

Bonny G. Rafel‘s commentary: Had the contract contained a “non binding” arbitration clause, I expect the court would not have invalidated the contract, but by forcing binding arbitration, the employee was signing away his constitutional right to a trial by jury.